Living standards in Britain have finally returned to pre-recession levels because of the rising incomes of the nation’s retirees, the Office for National Statistics (ONS) has said.
The latest snapshot of household incomes showed that, more than seven years after the financial crisis, the losses suffered in the most severe downturn of the modern age had finally been recouped.
But the ONS said the recovery since the trough in living standards reached three years ago was entirely due to the improved financial state of retired households, adding that working households still had ground to make up to return to pre-recession levels.
Using new statistical techniques, the ONS said its latest estimates showed that median household disposable income – adjusted for inflation and the number of people in each household – stood at £25,600 in 2014-15. That was about £1,500 higher in real terms than its recent low in 2012-13, and broadly similar to the 2007-08 peak of £25,400.
Despite the squeeze on incomes suffered during the recession of 2008-09 and the sluggish recovery that followed, living standards have more than doubled since 1977, growing by just over 2% a year on average.
Retired households are almost 10% better off on average than they were before the recession, their incomes having risen to £21,100 – £1,800 above their pre-downturn peak of £19,300.
The incomes of non-retired households also rose in 2014-15, but remain £800 below their pre-recession high of £28,900, at £28,100.
The ONS said for the first time it had used so-called nowcasting techniques to provide quicker estimates of trends in household incomes.
Jonathan Athow, the ONS director general for economic statistics, said: “Today’s release shows how ONS is exploiting existing data sources to provide key information on the economy and living standards much more quickly than before.
“The data show that, overall, household incomes have now returned to pre-downturn levels. However, the incomes of non-retired households have yet to regain their previous peak.”
Median real disposable incomes for retired households used to be c. half as large as for non-retired. Now it's 75%. pic.twitter.com/BcPQC690fk
— RBS Economics (@RBS_Economics) October 28, 2015
Britain’s pensioners have seen their spending power safeguarded by the triple lock, which guarantees that pensions rise by the rate of inflation, growth in average earnings or 2.5%, depending on which is the highest in any given year. Non-retired households, by contrast, have been affected by wages increasing more slowly than prices.
The ONS said its preliminary estimates suggested income inequality had been broadly unchanged between 2013-14 and 2014-15, but was slightly lower than it had been before the recession. The Gini coefficient, one yardstick for calculating income inequality, was 34.2% in 2007-08, but has since fallen to 32%. A Gini coefficient of zero would indicate that income was shared equally, while a Gini coefficient of 100% would mean the entire income of the UK was taken by one individual.
